Huge Currency Swap Agreement To Help Maldives On Foreign Exchange Reserves

India and Maldives on Monday sought to reset – boosted by a US$400 million – ₹ 3,000 crore currency swap deal – a relationship fractured by two diplomatic squabbles over the past 12 months, including last year.

When three Maldivian ministers made critical comments about Prime Minister Narendra Modi. The deal was announced as Maldives President Mohamed Muizzu made his first State visit to India. Mr Muizzu arrived in Delhi Sunday evening and, after a day’s rest, was accorded a ceremonial welcome by President Droupadi Murmu and the Prime Minister at Raj Bhavan, after which he paid tribute to Mahatma Gandhi at Rajghat and then went into a huddle with Mr Modi.

At a joint statement after the two leaders met, Mr Modi underlined New Delhi’s position as a “close friend” of the island nation, emphasising his ‘neighbourhood first’ foreign policy that has seen India act as a ‘first responder’ to emergencies affecting Male, including supplying Covid vaccines.

“Be it essential commodities, vaccines during Covid, or drinking water… we have played a good neighbour,” he said, adding India had today also virtually inaugurated the Hanimaadhoo International Airport on the Haa Dhaalu Atoll and, earlier, handed over 700 social housing units, as well as set up a drinking water and sewerage project to serve nearly 30,000 people across 28 Maldivian islands.

The Maldives, the PM then said, also has an important role – to help ensure the security of the Indian Ocean Region. This is an issue that was red-flagged by many within the government after Mr Muizzu – seen as a ‘pro-China’ leader – won last year’s election on what was called an ‘India out’ platform.

That platform included requesting Delhi to withdraw 90 military personnel in the Maldives to maintain and operate three aviation platforms for humanitarian and medical aid. These three – two helicopters and a Dornier aircraft – were a gift from India. After talks, Delhi replaced military personnel with “competent technical” staff.

Apart from the ejection of the military staff – of which Mr Muizzu has said he simply “did what the people of Maldives asked of me” – February’s docking of a Chinese spy ship masquerading as a research vessel also raised eyebrows after similar vessels docked at Sri Lanka’s Hambantota Port.

On these points, and the claimed ‘India Out’ agenda, which was seen as one of Mr Muizzu’s key poll promises, he insisted India remains a key partner in his efforts to secure regional stability and denied any ‘India out’ agenda. He said it was simply the case that “Maldives does not want a foreign soldier”.

$400 Million, ₹ 3,000 Crore Currency Swap
Meanwhile, as part of resetting of ties, India and the Maldives announced a currency swap – a financial agreement that sees two parties exchange the principal and interest of a loan in different currencies over a set period of time – to help Male overcome foreign exchange reserve issues.

This is seen as critical as Delhi looks to ward off China’s influence over Male and in the Indian Ocean Region, which includes Sri Lanka. India has also granted a US$100 million rollover of Treasury bills. “I am also thankful for India’s decision to provide support – ₹ 30 billion in addition to US$ 400 million bilateral currency swap – which will be instrumental in addressing forex issues right now,” he said.

Other bilateral measures announced are the launch of the RuPay card issued by the National Payments Corporation of India, a financial services firmed owned by a consortium of Indian banks. India is also assisting the Maldives with an infrastructure project for the Greater Male area.

Overall, both sides seem satisfied with the outcome of Mr Muizzu’s first bilateral visit to this country, the agreements signed and comments made reflect the growing bonhomie after the diplomatic spats.